CORPORATE FINANCE CUSTOM W/CONNECT >BI
CORPORATE FINANCE CUSTOM W/CONNECT >BI
11th Edition
ISBN: 9781307036633
Author: Ross
Publisher: MCG/CREATE
bartleby

Concept explainers

Question
Chapter 24, Problem 1CQ
Summary Introduction

To explain: The difference between a warrant and a traded call option.

Warrant:

Warrant is given to the security holder of those who purchase the shares. It is not the obligation of the shareholder but it is a right of the shareholder to purchase the share at a fixed price.

Option:

Option is the contract between two parties one is the buyer and the other is the seller. It gives the option to the buyer to purchase the share at a certain price at a fixed time.

Expert Solution & Answer
Check Mark

Answer to Problem 1CQ

  • There is a little difference between the warrant and the call option.
  • A company issues warrant and when it is implemented it increases the number of shares.
  • Option is the contract between two parties’ the investor and the company which does not affect the number of shares.

Explanation of Solution

  • Whenever the company issues warrant it increases the number of share, which is good for the company’s goodwill.
  • Call option does not have an effect on the number of shares of a company.
Conclusion

Hence, it can be said that the difference between both of these is only the number of shares that gets affected.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
What is a difference between Futures Contract and Forwards Contract?
How does a futures contract differ from a forward contract?
What is basis risk in relation to futures contract hegding?

Chapter 24 Solutions

CORPORATE FINANCE CUSTOM W/CONNECT >BI

Knowledge Booster
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
  • EBK CONTEMPORARY FINANCIAL MANAGEMENT
    Finance
    ISBN:9781337514835
    Author:MOYER
    Publisher:CENGAGE LEARNING - CONSIGNMENT
    Entrepreneurial Finance
    Finance
    ISBN:9781337635653
    Author:Leach
    Publisher:Cengage
  • EBK CONTEMPORARY FINANCIAL MANAGEMENT
    Finance
    ISBN:9781337514835
    Author:MOYER
    Publisher:CENGAGE LEARNING - CONSIGNMENT
    Entrepreneurial Finance
    Finance
    ISBN:9781337635653
    Author:Leach
    Publisher:Cengage